Bills were introduced on January 18 in both the House and Senate of
the Washington State Legislature that add Washington to the growing
number of states now actively moving to create public banking
facilities.

The bills, House Bill 1320 and Senate Bill 5238, propose creation of a
Washington Investment Trust (WIT) to “promote agriculture, education,
community development, economic development, housing, and industry” by
using “the resources of the people of Washington State within the
state.”

Currently, all the state’s funds are deposited with Bank of America.
HB 1320 proposes that, in the future, “all state funds be deposited in
the Washington Investment Trust and be guaranteed by the state and used
to promote the common good and public benefit of all the people and
their businesses within [the] state.”

The legislation is similar to that now being studied or proposed in
states including Illinois, Virginia, Hawaii, Massachusetts, Maryland,
Florida, Michigan, Oregon, California and others.

The effort in Washington state draws heavily on the success of the
92-year-old Bank of North Dakota (BND), currently the only state-wide
publicly owned U.S. bank. The BND has helped North Dakota escape the
looming budgetary disaster facing other states. In 2009, North Dakota
sported the largest budget surplus it had ever had.

The Wall Street Credit Crisis Is Crippling State and Municipal Governments

That state budget deficits are reaching crisis proportions was underscored in a January 19 New York Times article:

[A]lmost everywhere the fiscal crisis of states has grown more acute.
Rainy day funds are drained, cities and towns have laid off more than
200,000 people, and Arizona even has leased out its state office
building…

“It’s the time of the once unthinkable,” noted Lori Grange,
deputy director of the Pew Center on the States. “Whether there are tax
increases or dramatic cuts to education and vital services, the crisis
is bad.”

The “once unthinkable” includes not only draconian cuts in services,
increases in taxes, and sale of public assets, but now filing for
bankruptcy. States are not currently allowed to go bankrupt, but a move
is afoot in Congress to change all that. Bankruptcy proceedings would
allow states to escape pension and other contractual obligations,
following the dubious lead of such megacorporations as General Motors
and Continental Airlines.

Meanwhile, fears of state bankruptcy have caused state and municipal
bond values to plummet and borrowing costs to soar. As with Greece and
Ireland, rumors of bankruptcy become a self-fulfilling prophecy,
bringing out the hedge funds and short sellers that turn prophecy into
reality.

Addressing the Problem at Its Source: The North Dakota Model

While drastic spending cuts are being proposed and implemented, the
states’ woes are not the result of over-spending. Rather, they were
caused by loss of revenues and increased borrowing costs resulting from
the Wall Street banking crisis. Jammed with toxic assets, derivatives,
and the subprime mortgage debacle, the Wall Street credit machine ground
to a halt in the fall of 2008 and has still not recovered.

And it is here, in generating credit for the state, that the Bank of
North Dakota has been spectacularly successful. By providing affordable,
low interest credit for business expansion, new businesses and
students, the BND has helped North Dakota largely sidestep the credit
crisis.

Unlike private banks, the profits of a public bank are all returned to the only shareholder: the
people.

The BND partners with private banks, providing a secondary market for
mortgages; offers “wholesale” banking services such as check clearing
and liquidity support to private banks; and invests in North Dakota
municipal bonds to support economic development. In the last ten years,
the BND has returned more than a third of a billion dollars to the
state’s general fund. North Dakota is one of the few states to
consistently post a budget surplus.

Unlike private banks, public banks don’t speculate or gamble on high
risk “financial products.” They don’t pay outrageous salaries and
bonuses to their management, who are salaried civil servants. The
profits of the bank are all returned to the only shareholder: the
people.

Washington State Representative Bob Hasegawa, a prime sponsor of the
Washington legislation, called the proposal for a publicly-owned bank “a
simple concept that will reap huge benefits for Washington.” In a
letter to constituents, he explained, “The concept (is) to keep
taxpayers’ money working here in Washington to build our economy.
Currently, all tax revenues go into a ‘Concentration Account’ held by
the Bank of America. BoA makes money off our money and we never see
those profits again. Instead, we can create our own institution and keep
taxpayers’ dollars here in Washington, working for Washington.”

Hasegawa said a key feature of the Washington banking institution is
that it will work in partnership with financial institutions,
community-based organizations, economic development groups, guaranty
agencies, and others. He said the Washington Investment Trust will offer
“transparency, accountability, and accuracy of financial reporting,” a
welcome change from the accounting tricks common among the large Wall
Street money center banks today.

A public hearing on HB 1320 is scheduled for Tuesday, January 25th. The bill is assigned to the Business and Financial Services
Committee in the House and the Financial Institutions, Housing &
Insurance Committee in the Senate.

Interested?

Visit for more information on the movement for publicly-owned banks.

The public bank concept is gaining ground on the state level, attracting proponents across the political spectrum.

Each of us can help build a resilient financial system that will serve real people in real communities.

Ellen Brown: When we recognize that money is simply credit, we can unleash it as a powerful tool for our communities.